Welcome to The Banana Republic of America

The following is commentary that originally appeared at Treasure
Chests for the benefit of subscribers on Monday, August 1, 2016.

You may not know this, or simply prefer to ignore the reality, but America,
as you know, is changing rapidly – morphing into a 'banana
republic' before your very eyes. No? Well let's take a look at the definition
of the term and see if it applies. According to Wikipedia, a banana republic
"typically has stratifiedsocial
classes, including a large, impoverished working
class and a ruling plutocracy of
business, political, and military elites. [1]"
This politico-economic oligarchy controls
the primary-sector
productions to exploit the country's economy." Most American's know something
is wrong in this respect, which is why increasing numbers now say the country's
on the wrong
track, and the pace of radical change is
accelerating.

Does America have 'stratified social classes'? Both by location and wealth (net
worth and income), the answer to this question is of course 'yes'. What's more,
the 'class gaps' are
widening at an accelerating rate. If one is of the working
class, the proletariat, you cannot borrow or create money / capital at
little to no cost like the 'parasite classes' (corporates, bankers, etc.),
our modern day plutocracy,
and without access to this 'free capital', the working classes are quickly
being transformed into slave labor. So you see the politico-economic oligarchy controls
the primary sector production of the free money, which is America's chief product
and export, meaning they are in fact monopolistically exploiting the economy
at the expense of the working classes.

So again, and by definition, America is in fact being transformed into a full
blown banana republic right now, and at a rapid pace to boot. And this is happening
in spite of growing resistance from the disenfranchised classes, which have
yet to have any meaningful impact on slowing down the parasite classes. This
will change however, and this change will happen fast once it visibly arrives
as well. At least that's the way it will appear to those who are happy to ignore
what's happening right now, where all the warning
signs (it's war) are there, like Venezuela, expect some rendition of Animal
Farm in your neighborhood soon as well. Westerners are the best at distraction and reality
avoidance with all the technology available to facilitate such folly, however
at some point reality will rear its ugly head no matter, and a
price for this arrogance will be paid.

Michael Hudson is on
to something in reducing the class war down to how the approaching election
turns out, however this is view is too simple. In his view, it's neocon neoliberalism
vs. Trump's rightious populism. Of course Trump is not as naïve as Hudson
would have you believe, where there's a big difference between talking about
the dissolution of NATO for political
shock value, and another to invite assassination by actually following
through with such talk. Because if Obama has taught us anything, once the
election is over, following through on election promises is optional. So
don't expect The Donald to start World War III (WWIII) all by himself, which
is what democrats (who are today's quintessential war mongering neocons)
would like you to believe.

WWIII is probable simply due to the increased competition for survival that
is coming back into view – the laws of the jungle if you will – which I pointed
out earlier
this year – coming into view for the masses
now.

So by the same token then, don't expect The Donald to actually give a shit
about the poor either. I hope I'm wrong, and he actually follows through on
some of his rambling, however it's amazing how fast reality hits these guys
in the face once they are actually in office. If an increased police state
/ stronger military / and all the other promises are to be kept by Trump, where
is all the money to come from? The answer is of course the printing presses,
which is likely why Treasuries are becoming increasingly unsettled. This is
the factor that could trump Trump you see, because he won't be able to follow
through on any of his election promises if the bond market caves in. Welcome
to the Jungle Donald.

And for everybody else – Welcome to The Banana Republic of America – coming
to your town soon. Make no mistake about it – no matter who wins in November
it won't matter for the economy, because something is going to prick the debt
/ equity bubbles at some point in the not too distant future, even if process
takes us out a few more years. Word is, in spite of the 'everything is just
fine' picture the feds are painting to get their girl into the White House,
retail sales are crashing again like its 2008, not just in the
States, but across the
West. (i.e. understandable with Brexit.) This is of course what happens
when you hollow out the working classes. It's difficult maintaining the illusion
on minimum wages. Since 2009 the difference has been made up with credit, however
this game is coming to an end with consumer's credit cards now maxed
out.

This is of course why the calls for helicopter
money are on
the rise, because the parasite classes are very aware of the
situation, so they know something must be done soon or risk implosion.
The financialized
economy is like a drug addict that needs increasing amounts of free money
or its dependence is exposed. (i.e. The
Emperor Has No Clothes.) This is of course not news for those who follow
the folly that has become the complex game theory that is now how the economy
is managed. The thing that will be 'news' however, is the price inflation
such monetary inflation will create. This will be a big surprise to a great
many people as the money
multipliers crank up again, with a crazed population finally able to
spend some of that mysterious money they have only heard about up until now.
(See Figure 1)

Figure 1

And spend it they will – every last penny. Because hey – it's free. That's
why unlike QE for the bankers, they will not be able to sterilize QE
for the people, which will play hard on the sovereign bond market. This is
why the Gold to US 30-Year Treasury Bond Ratio is set to take off anytime now.
What's more, if US price managers continue support bond prices to the extent
losses are tame, this should do nothing but fuel gold (all precious metals)
even more, as the hyperinflation helicopter
money will create must be discounted in the markets is some way. This is banana
republic economics 101 – just look at
Venezuela. It should be understood this why the bid remains in precious
metals in spite of their overbought condition. Speculators see what's coming
and are front running the lunacy that is about to be unleashed on the public
as the status quo attempts to maintain their position. (See Figure 2)

Figure 2

But again, as per above, perhaps the markets are watching Trump pull ahead
in the
polls too, which in and of itself is sufficient to scare the bejesus out
of inflation watchers, because just the infrastructure spending he's planning
is estimated to add some $10 Trillion to the national debt over the next ten
years, for a 50% increase. This kind of talk (and other
reasons) is changing people's minds on gold (and silver – seen below),
where it's increasingly beginning to look like the 'metal of kings' is just
testing the break above Fibonacci resonance resistance (see above) at $1300
before accelerating higher. Like silver, pictured below, once important Fibonacci
resonance resistance at $1300 is taken out (which is $21-plus for the white
metal), resurgence to all time highs is likely not far behind, explaining the
meteoric rise in the more liquid precious metal shares. (See Figure 3)

Figure 3

On this token then, if Hillary pulls ahead in the polls again (it's already
happened), which is sure to happen given mainstream media's (MSM's) love
affair with whoever best represents their interests (Hillary), don't be surprised
if precious metals pullback at some point, given it's beginning to look like
such a time may not arrive just yet. (i.e. meaning a seasonal inversion [down
in September] is looking increasing likely.) Of course appearances can be
deceiving, so please try to look at the 'big picture' whenever a real correction
does hit the sector. The momo boys are going to hit the wall at some point,
and when they do, the correction will come fast and furious. If not before,
it might come with the a hit in the broads because the dollar($) will rally
when that happens. Here too however, exactly when this is going to happen
is anybody's guess. One thing is for sure though – I sure as hell wouldn't
short stocks until I know the 'Hillary situation' is fully discounted. (See
Figure 4)

Figure 4

What does that mean? It means stocks will not be allowed to fall by the feds
(especially the Fed) until either Hillary gets in, or it becomes certain she's
not. If stocks are to fall in October this year (like in
'87) it will have to be the latter scenario obviously, but one should not
tie their wagon to any scenario in terms of looking for a top in stocks until
RSI on the monthly S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio (see
above) is hitting upper sinusoidal resistance at approximately 70. And then
after that, short sellers have hyperinflation worries of course, which is why
I recommend not shorting anything ever until the bond market sells off a great
deal. (i.e. using up all that liquidity.) Until then, you want to do one thing
and one thing only – get long inflation – with precious metals at the top of
the list.

Speaking of lists, and getting long inflation, the CRB has likely pulled back
to start looking at commodity based opportunities for those so inclined. We
will not be doing so offiicially here with a stock selection page because of
the risks involved, however, this should not stop those so inclined if they
just got to have some energy or base metals exposure. And certainly with helicopter
money likely on the way, I don't doubt higher prices across the board are on
the way. The thing that holds me back is the realization helicopter money might
not be unleashed until after / or during a macro crash, so prices could still
fall much further. This is why I would prefer to see helicopter money arrive
in Japan and China before making any brash moves, especially with prospects
in precious metals so good at present.

Because even if we are close to a short-term top in precious metals, which
as alluded to above may not be the case if a seasonal inversion is in the cards,
any pullbacks will be looked at as 'non-events' in the big scheme of things
years from now. The test will be this week. If the Gold
Bugs Index (HUI) can get through the 'inverse head and shoulders pattern'
target of 280 on a weekly closing basis, then a run to as high as 400 becomes
possible once the large round number at 300 is taken out. (i.e. think Progressive
Interval System [PI].) Thing is, this doesn't mean the impending correction
afterwards wouldn't take prices back down below 250 again anyway, however the
point is, with monetary conditions the way they are, and again, prospects so
good for the sector long-term, precious metals are still the only way to go
right now considering the risks in other sectors.

So although it appears precious metals are to continue higher into August,
creating the set-up for a 'seasonal inversion', taking them back down in September,
based on the count, failure at or before 350 HUI is a more likely target, however
again, anything is possible once 300 is taken out. I wished I had better news
for those looking for a pullback, however the news continues to support the
momo players in the crowd, and these guys are crazy (think hedge funds), so
a top will not be put in place until they are completely exhausted. The good
news associated with the situation is most of our stocks in the Precious
Metals Portfolio are way up, with the majority of our selections tacking
on anywhere from 200 to 600%. Even the ones that continue to sleep because
gold and silver prices are not high enough to garner serious interest are looking
better here.

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